Student Debt Analysis
Analysis of median student debt and monthly student debt payments was completed using the 2014-2015 College Scorecard data from the U.S. Department of Education. This analysis included all institution types except institutions with 30 or fewer students in the cohort of those who had completed their program. Analysis included median debt and monthly debt payments for those who had completed their program (variables GRAD_DEBT_MDN_SUPP and GRAD_DEBT_MDN10YR_SUPP).
The national median debt and monthly payment were based on weighting data for individual institutions by the number of students in their cohort as a proportion of all students in the completed cohort (author’s analysis of variable GRAD_DEBT_N_SUPP). State median debt and monthly payment were similarly based on weighting data for individual institutions by the number of students in their cohort as a proportion of all students in the completed cohort in that state.
Living Wage Analysis
Given limitations in the available data and continuity of data sets, this study updates the previous Job Gap Economic Prosperity Series living wage calculations as closely as possible using 2015 data. Where 2015 data were not available, data for the closest year available were adjusted for inflation to reflect 2014 dollars.
Family Living Wage Budgets
A living wage is a wage that provides enough for a household to meet its basic needs and have money for savings and miscellaneous personal and household expenses without government subsidy. For this study, a modified market basket approach was used. Household budgets, upon which living wages are based, include:
- Housing and utilities;
- Health care;
- Child care;
- Household, clothing, and personal items;
- Savings; and
- State and federal taxes
Household types are selected to reflect the range of budget requirements for five household types:
- Single adult
- Single adult with one child between the ages of 6 and 8
- Single adult with two children, one between the ages of 6 and 8 and the other between the ages of 1 and 2
- Two adults including one wage earner, with two children, one between the ages of 6 and 8 and the other between the ages of 1 and 2
- Two adults, both wage earners, with two children, one between the ages of 6 and 8 and the other between the ages of 1 and 2
Calculations were completed for a single adult for all 50 states and Washington, D.C., and calculations for the other four household types were completed for 18 states and for Washington, D.C.
Food costs are derived from the “Low Cost Food Plan” in the U.S. Department of Agriculture’s (USDA) monthly report “Cost of Food at Home: U.S. Average at Four Cost Levels.”[i] Food costs are based on an annual average of monthly food costs.
The Low Cost Food plan values are based on food expenditures by the 25th to 50th percentiles of the U.S. population, as determined in the National Household Food Consumption Survey. This plan is 25-50 percent higher than the “Thrifty Food Plan,” which is used as the basis for food stamp allocations and federal poverty benchmarks. The Thrifty Plan was not used because nutritionists consider it to be nutritionally inadequate on a long-term basis. The Low Cost Plan is based on the assumption that all food is prepared at home.
Households are calculated based on the following: Single Adult HH1 (20-50 year old woman); Single Adult with Child HH2 (20-50-year-old woman and 6-8-year-old child); Single Adult with two children HH3 (20-50-year-old woman, 6-8-year-old child, and 1- to 2-year-old child); HH4 and HH5 are calculated with one woman 20-50 years old, one man 20-50 years old, one 6-8-year-old child, and a 1-2-year-old child.
There are no adjustments for these food plans by state or region. Other reports indicate that the variation in food prices is small enough that geographic adjustments are not necessary. The USDA values are based on 2001-2002 data and updated monthly for inflation.[ii]
Housing and Utilities
Housing and utilities costs are derived from U.S. Department of Housing and Urban Development (HUD) Fair Market Rents and information provided by CenturyLink, Fairpoint, AT&T, Frontier, Sage Telecom, Verizon, Alaska Communications and Hawaiian Telecom.
Fair Market Rent data are provided at a county level.[iii] Fair Market Rents are gross rent and utilities estimates “that would be needed to rent privately owned, decent, safe, and sanitary rental housing of a modest (non-luxury) nature with suitable amenities.” They include shelter rent plus the cost of all utilities, except telephones. HUD sets Fair Market Rents at the 40th percentile (in other words, 40 percent of the standard quality rental housing units are at or below this cost, but 60 percent cost more than this figure). The 40th percentile rent is drawn from the distribution of rents of all units occupied by renter households who moved to their present residence within the past 15 months. Public housing units and units less than 2 years old are excluded. It is assumed that families with one or two children will rent a two-bedroom unit, and that a single adult household will rent a one-bedroom unit.
Affordable housing is typically defined as less than 30 percent of a household’s annual income. Households that spend more than this are considered “cost burdened” and may have difficulty affording other necessities.[iv]
The cost of basic service for unlimited local calls, with no call waiting, voice messaging, or other extras was determined based on the rates from CenturyLink in Alabama, Arizona, Colorado, Florida, Georgia, Idaho, Iowa, Indiana, Kansas, Michigan, Minnesota, Missouri, Mississippi, Montana, North Carolina, North Dakota, Nebraska, New Jersey, New Mexico, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, and Washington. Verizon was used in California, Delaware, Massachusetts, Maryland, Rhode Island and Washington, D.C. and with conversations with experts in New York, where the state has a rate cap for basic phone service. AT&T was used in Arkansas, Illinois, Kentucky, Louisiana, and Oklahoma. In Connecticut and Wisconsin, rates for the most comparable phone plan from Sage Telecom were used, and Fairpoint was used for rates in Maine, Vermont, and New Hampshire. Separately, West Virginia used Frontier rates, Hawaii used Hawaiian Telecom and Alaska used Alaska Communications. The estimate does not include any long distance calls.[v] The estimate also does not include set-up fees, federal fees, or taxes. Each state’s basic phone cost was added to its weighted average Fair Market Rent to determine the whole cost of rent and utilities for the state.
Housing and utilities does not include the cost of Internet, television service, or other additional optional utilities. While many families do include the costs of these in their utilities budget, for the purposes of this study, these are considered optional expenses so are not included in our report.
Transportation costs are derived using the 2009 National Household Travel Survey from the U.S. Department of Transportation (DOT)[vi] and 2015 Internal Revenue Service (IRS) “Standard Mileage Rates” as an approximate cost for automobile travel.[vii]
The transportation component of the family budget is based on the cost of maintaining a private vehicle, and the National Household Travel Survey provides data on the annual vehicle miles of travel. The mileage totals are adjusted for the number of adults, workers and persons in each household.[viii] The number of annual vehicle miles traveled per household was then multiplied by the IRS standard mileage reimbursement rate for the year of the study which accounts for vehicle cost, insurance, gasoline, repairs, depreciation, and vehicle registration fees.[ix]
Health care expenses include insurance premiums as well as the out-of-pocket costs not covered by insurance. Estimates of health care expenditures are prepared for families that are covered by employer-sponsored insurance.[x] While many families now purchase health insurance through state or federal exchanges, People’s Action Institute believes employers have a stake in ensuring that their employees have access to quality health care, therefore assumes that a living wage includes employer-sponsored insurance.
Workers who earn low wages are far more likely than higher-wage earners to contribute a large share of their income to their health insurance premiums.[xi] Additionally, low-wage workers are much less likely than higher-wage earners to work in companies that offer health insurance to their employees.[xii] In 2013 in the U.S., 48 percent of the population had employer-based insurance, 6 percent purchased private, individual health insurance, 16 percent were covered by Medicaid, 15 percent were covered by Medicare, and 13 percent were uninsured.[xiii] Asserting that all jobs should provide enough to make ends meet, including ensuring workers have access to quality health care, People’s Action Institute continues to include employer-sponsored health coverage in our living wage calculations.
Average employee contributions to employer-sponsored insurance premiums were obtained for each state from the Insurance Component Tables of the 2014 Medical Expenditure Panel Survey (MEPS).[xiv] Although MEPS contains some information about co-payments and deductibles, it does not provide detailed information about the typical package of health benefits.
Out-of-pocket costs represent the medical expenses that are not covered by an insurance policy, and are instead paid by the individual or their family for health care received.[xv] To arrive at a total figure for health care costs, an average value for out-of-pocket expenses was added to the family share of insurance premiums. Out-of-pocket costs are based upon figures from the 2013 MEPS Household Medical Expenditure Tables, which can be modified to produce specific out-of-pocket data by age and geographic region.[xvi] Out-of-pocket costs for those purchasing private insurance and those buying into employer-sponsored health insurance are calculated using the same methods.
Child care expenses are based on the assumption that all single-parent households and households with two working parents require child care services. Estimates are derived from market rate surveys conducted by state welfare agencies. Because the federal government and most states subsidize child care for low-income families up to the 75th percentile — the statewide child care rate at which 75 percent of child care slots may be purchased — state-level data are typically available and are used for these estimates.
As child care market rate surveys are done by each individual state, their methods vary. For this reason, this study’s methods vary slightly state-to-state. Most states provide child care costs by region, while some provide costs by county or ZIP Code. The costs of the various types of child care are averaged for each county, weighted by that county’s population, and summed to produce a weighted average for the cost of child care in each state. 2015 data was used where available, but for states with the most recent Market Rate Survey occurring in a year other than 2015, the figures were adjusted for inflation.
Realizing that school-age children do not attend child care full-time during the school year, school-age children are assumed to attend either half-time or part-time for 9 months (depending on how the state reports data) and full-time for 3 months. In the two-parent household with only one parent working, it is assumed that child care is not necessary. So, in Household 1 (single adult) and Household 4 (two parents, two children, with only one working parent), child care costs are $0.
Household, Clothing, and Personal Items
Household, clothing, and personal spending estimates are derived from the Consumer Expenditure Survey (CES) and are calculated as a fixed percentage of total household spending minus child care and taxes.[xvii] Spending on these items, as a proportion of total income, is consistent across income categories. No detailed expenditures or needs-based estimates are available for these budget categories. A total percentage of 18 percent for this item is used in the household budget, based on the 1998 CES estimates. It is essential to use a percentage for household, clothing, and personal expenditures that is fixed over time. The first year of the Job Gap study was based on CES data from 1998. We believe that data from that year fairly represent household costs, and we have used the same proportions for subsequent years of this study. As defined by the CES:
- Household costs include laundry and cleaning supplies, stationery supplies and postage, household linens (towels, sheets, etc.), sewing materials, furniture, floor coverings, major appliances, miscellaneous house wares (small appliances, plates, etc.), and other items needed to operate and maintain a household. Household costs are estimated at five percent.
- Clothing and personal costs include clothing, personal care products, reading materials, and other personal expenses. Clothing and personal costs are estimated at six percent.
- Recreation and entertainment costs include fees for participant sports, admissions to sporting events, movies and video rentals, TV/sound equipment, music, pets, toys, and other entertainment expenses. Entertainment costs are estimated at five percent.
- Miscellaneous costs include items not covered in the above categories such as school supplies, bank fees, and credit card finance charges. Miscellaneous costs are estimated at 2 percent.
The American Savings Education Council (ASEC) has developed a formula for estimating the percentage of household income that families should save.[xviii] This study assumes that workers are not enrolled in employer-sponsored retirement plans, given that only 33 percent of workers have access to an employer-sponsored retirement plan.[xix] When applied to households in our study,[xx] the recommendation is that families should save between seven and 13 percent of household income for retirement. Using the lower estimate of seven percent, an additional three percent was added to cover emergencies and allow families to plan ahead. Savings rates are set at 10 percent of spending minus child care and taxes.[xxi]
State and Federal Taxes
Taxes include federal taxes (including child care credits and the Earned Income Tax Credit), payroll taxes (Social Security and Medicare), and state income taxes where applicable. Property taxes are not included here because they are accounted for in housing (rental) costs, though rental credits are included where applicable. State and local sales taxes are not added to the income tax figure because they are already reflected in the cost of food, transportation, and household costs.[xxii]
The total living wage budget before taxes is assumed to represent each household’s annual income when calculating taxes. Federal and state income tax returns are prepared for each household using software from H&R Block.[xxiii] Employment taxes are calculated at 7.65 percent of earned income (6.2 percent for Social Security, 1.45 percent for Medicare). For federal taxes it is assumed that families use the standard deduction and that there is no source of outside income. Where appropriate, deductions are made for applicable child care and EITC benefits, including the $600 per child credit. Once the tax amount is calculated, it is added to each family’s monthly budget to determine the total living wage.
[i] U.S. Department of Agriculture, Center for Nutrition Policy and Promotion “Cost of Food at Home, U.S. Average at Four Levels,” available at http://www.cnpp.usda.gov/USDAFoodCost-Home.htm
[ii] U.S. Department of Agriculture, “Official USDA Food Plans: Cost of Food at Home at Four Levels, U.S. Average, December 2012,” available at http://www.cnpp.usda.gov/USDAFoodCost-Home.htm
[iii] Derived from the U.S. Department of Housing and Urban Development’s Fair Market Rent County Level Data File, available at http://www.huduser.org/datasets/fmr.html.
[iv] U.S. Department of Housing and Urban Development, “Affordable Housing,” November 1, 2010, available at http://www.hud.gov/offices/cpd/affordablehousing/
[v] From https://shop.centurylink.com, http://www.fairpoint.com, http://www.sagetelecom.net/ and through email conversations with a representative from New York. Numbers are current as of October 2012 for Colorado, Idaho, Maine, Montana, Oregon, and Washington, and are current as of September 2013 for Connecticut, Florida, Nevada, and Virginia.
[vi] Available online at http://nhts.ornl.gov/.
[vii] Internal Revenue Service, “Standard Mileage Rates,”available at http://www.irs.gov/taxpros/article/0,,id=156624,00.html
[viii] Tim Reuscher, Oak Ridge National Laboratory, National Transportation Research Center, personal communication, August 17, 2004.
[ix] For IRS standard mileage rates, see http://www.irs.gov/taxpros/article/0,,id=156624,00.html
[x] JOBS NOW Coalition, “The Cost of Living in Minnesota 2002,” 2003. The methods used to update the health care section of the 2001 Northwest Job Gap Study were largely modeled on the JOBS NOW report and input from authors Colette LaFond and Bill McMahon of UrbanPlanet, and those methods have remained unchanged through the current report.
[xi] The Commonwealth Fund, On the Edge: Low-Wage Workers and Their Health Insurance Coverage, April 2003.
[xiii] The Henry J. Kaiser Family Foundation. (2012). Health Insurance Coverage of the Total Population. http://kff.org/other/state-indicator/total-population/
[xiv] U.S. Department of Health and Human Services, Agency for Health Care Research and Quality, Private-Sector Data by Firm Size and State, 2012(Table II Series), 2009, available at http://www.meps.ahrq.gov/mepsweb/data_stats/quick_tables.jsp.
[xv] Doris Lefkowitz, Director, Medical Expenditure Panel Survey, Agency for Health Care Research and Quality, personal communication, July 29, 2004.
[xvi] U.S. Department of Health and Human Services, Agency for Health care Research and Quality, “Table 1: Total Health Services-Median and Mean Expenses per Person With Expense and Distribution of Expenses by Source of Payment: United States, 2010 and 2011,” Medical Expenditure Panel Survey Household Component Data. Generated interactively. available at http://www.meps.ahrq.gov/mepsweb/data_stats/quick_tables_results.jsp?component=1&subcomponent=0&year=2010&tableSeries=1&searchText=&searchMethod=1&Action=Search.
[xvii] Consumer Expenditure Survey, Bureau of Labor Statistics, U.S. Department of Labor, “2009 Expenditure Shares Tables by Region of Residence” (Table 52), available at http://www.bls.gov/cex/2009/share/region.pdf
[xviii] This formula is available online at http://www.asec.org/ballpark/.
[xix] The Pew Charitable Trusts. (2016). “Employer-Sponsored Retirement Plan Access, Uptake and Savings.” http://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2016/09/employer-sponsored-retirement-plan-access-uptake-and-savings
[xx] This figure is consistent with previous versions of the Job Gap Study
[xxi] This figure is consistent with previous versions of the Job Gap Study.
[xxii] Economic Policy Institute, How Much is Enough? Basic Family Budgets for Working Families, 2000.
[xxiii] As discussed in overview of OES, available at: http://www.bls.gov/oes/home.htm.